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The Affordable Care Act Individual Mandate and Penalties

The Affordable Care Act Individual Mandate and Penalties

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Before January 2019, you paid a penalty if you didn’t have required health insurance. This is called the individual mandate, also sometimes known as the "Obamacare" individual mandate.

While you're still technically required to have health insurance in the U.S., there is no federal penalty for not having coverage. But there are state-level individual mandates in five states and Washington, D.C.

What is the individual mandate?

The individual mandate requires that everyone have health insurance.

The idea of the individual mandate is to have both healthy and unhealthy people contribute to the cost of health insurance. When more people pay in, it helps to balance costs and make insurance more affordable overall.

The Affordable Care Act is meant to provide health insurance as cheaply as possible, including for people with preexisting conditions. Prior to this legislation, insurers could refuse coverage or charge more to people with health needs that might increase a company's costs, leaving many people without insurance.

Are there tax penalties for the individual mandate?

Beginning in 2014 until the end of 2018, people without health insurance were charged a federal tax penalty when they filed their income tax returns. Fines started at $95 for an individual and increased each year until 2016, when the cost was $695 or 2.5% of a person’s annual income, whichever was greater. From 2016 through 2018, the penalty was a flat dollar amount based on U.S. inflation rates.

The maximum penalty for an individual was based on the national average yearly cost for a Bronze plan sold through the health insurance exchange. In 2014, that amount was $204 a month for an individual or $2,448 per year.

Does the individual mandate still exist?

The individual mandate still exists, to the extent that you're still required to maintain health insurance. But in January 2019, the tax penalty piece of the individual mandate was removed at the federal level.

While you no longer pay a federal penalty for lack of insurance, you could face state-level penalties if you live in California, Massachusetts, New Jersey, Rhode Island or Washington, D.C. Residents of Vermont aren't charged a fee, but they must report whether they have coverage on their state tax returns.

Tax penalties by state

Some states' tax penalties are similar to the original federal mandate, while other states have very different rules. You may want to get familiar with the requirements for your state to avoid unexpected costs at tax time.

Generally, it's cheaper to have health insurance than to go without and pay a tax penalty.

This is especially true if you have a low or moderate income, which could qualify you for subsidies to help cover your insurance costs. But even if you pay full price for insurance, you're protected from having to foot the entire bill for a major health event.

California

In California, tax penalties for not having health insurance typically increase each year based on inflation. For 2022, residents without coverage for the entire year pay a minimum penalty of $800 per adult and $400 per dependent child under the age of 18. A family of four who goes the whole year with no coverage will owe a minimum of $2,400 come tax time.

You can find out what you may owe using California's tax penalty estimator.

Massachusetts

Tax penalties for going without insurance in Massachusetts are based on income and family size and only apply to adults over age 18. If you're single and your income is at or below 150% of the federal poverty level, you won't pay a penalty. Individuals earning between 150% and 300% of the federal poverty level pay no more than half of the cost of the cheapest ConnectorCare plan sold on the state's insurance exchange. Penalties increase for families and higher-earning individuals.

New Jersey

New Jersey's individual mandate is called a shared responsibility payment. If you don't have coverage or qualify for an exemption, you'll pay a fee based on household income, family size and the average annual cost for a Bronze plan in the state.

New Jersey provides a calculations page to help you estimate your shared responsibility payment.

Rhode Island

If you don't have health insurance in Rhode Island, you'll pay either 2.5% of your yearly household income or a per-person fee of $695 plus $347.50 for each child under age 18, whichever is higher.

Under the percentage method, your maximum penalty won't exceed the average annual cost of a Bronze plan sold on the state insurance exchange. If you must pay the per-person penalty, you only need to count the people in your household who don't have insurance.

Washington, D.C.

The individual mandate for Washington, D.C., residents is similar to that of Rhode Island. You must have qualified health insurance, get an exemption or pay a penalty when you file your D.C. tax return. You pay a flat fee of $695 per adult and $347.50 for each child under 18 or 2.5% of your family income, whichever is greater.

Maximum tax penalties are based on the average annual cost of a Bronze plan sold through the DC Health Link insurance exchange. In 2022, the maximum penalty is $3,450 per year per person. In a household where multiple people are without coverage, that amount is multiplied by the number of people without coverage up to a maximum of five household members. This means the penalty for a family of five or more would not exceed $17,250.

What is minimum essential coverage?

Minimum essential coverage is at least the lowest amount of coverage required to meet the individual mandate. Minimum essential coverage plans provide the 10 essential health benefits required by the Affordable Care Act and adhere to federal rules for maximum deductible and copay amounts.

You have minimum essential coverage if you're enrolled in any of the following plans:

  • Government-sponsored health care programs such as Medicaid, Medicare, the Children's Health Insurance Program (CHIP), Tricare, coverage from Veterans Affairs or health coverage for Peace Corps members
  • Employer-sponsored health insurance plans and other plans offered in the small or large group markets
  • Individual plans available on or off the federal or a state insurance exchange, as well as grandfathered plans

Frequently asked questions

Is health insurance required?

You're required to have health coverage in the U.S., but you no longer pay a federal tax penalty for no health insurance. In some states, you'll pay a state-level penalty for going without a health plan.

When was the health insurance mandate repealed?

The health insurance mandate has not been repealed completely. You still must maintain health coverage but are no longer required to pay the federal penalty, which was removed at the beginning of 2019.

Which states have health insurance mandates?

There are health insurance mandates with financial penalties in Washington, D.C., and four states: California, Massachusetts, New Jersey and Rhode Island. You won't pay a penalty in Vermont but are still required to report on your state tax return whether you have coverage.

How can I avoid paying a tax penalty for not having insurance?

To avoid paying a tax penalty, make sure you and your family members enroll in a qualified health plan. If you're concerned about cost, keep in mind that you may be eligible for help with monthly payments and other insurance expenses based on your income, or you might qualify for coverage through Medicaid or CHIP.

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